Reverse Mortgage Pitfalls

For many older Americans, the opportunity to cash in on the equity that is in their home is a Godsend, but they must beware the reverse mortgage pitfalls. And, yes, they do exist.
 
Although the values of this type of mortgage are extolled in many types of media, senior citizens must be aware of all of the facts about them. While they can experience a cash benefit from a reverse mortgage, they can also spend a great deal of cash getting one. In addition, some people may feel uncomfortable with the impending sale of their home looming over them every time they fall ill or need to enter the hospital for any reason.
 
The idea behind a reverse mortgage is a sound one. After paying into a traditional mortgage over a period of years, people may enter their golden years only to find they are living in an equity-rich home yet not have enough extra funds to enjoy their planned retirement. A reverse mortgage allows them to draw off a portion of that equity as a monthly stipend or take a lump sum payout.  They will continue to live in and retain full ownership of their home until such time they die or must leave the home to enter assisted living.  At no time do they repay any of the monies received from the equity. When the home is no longer used as the primary residence of the senior citizen, the lender takes control and sells the home.
 
When obtaining a reverse mortgage, pitfalls can be steep in the way of fees. There are numerous fees that are applied, and can easily amount to large sums of money, depending on the value of the home. Should the home be sold outright by the homeowner, the fees the lender may have garnered would remain in the pockets of the homeowner; supplying them with even more equity than the reverse mortgage proceeds would have given. This amount could be in the thousands of dollars, which could provide rental payments on an apartment or help to pay for an RV in which to travel. 
 
There have also been reports of individuals who, after taking a reverse mortgage, experience a health issue that requires a hospital stay. These seniors have told of appraisers arriving at their home for the purpose of obtaining information for a home sale; anticipating the death or incapacity of the homeowner. This type of discomfort greatly affects the wellbeing and mental state of the homeowner, understandably. 
 
While many people can benefit from a reverse mortgage, pitfalls do exist that can reduce the benefit for others. Careful consideration of alternative methods of obtaining money should be taken before agreeing to this type of mortgage.